Morning Commentary: Valeant, California Resources outperform flat junk market; Michael Baker eyed

By Paul A. Harris

Portland, Ore., Nov. 7 – Junk bonds were trading flat to slightly weaker on Tuesday morning, a trader said.

The high-yield CDX contract was down 10 cents.

The SPDR Blmbg Barclays High Yield Bd ETF (JNK) was flat at midmorning, up a penny, or 0.03%, at $36.99 per share.

Health care bonds and wireline telecom paper were heavy, the trader said.

Against that backdrop longer maturity bonds of Valeant Pharmaceuticals International Inc. were up 2 points. The VRX Escrow Corp. 5 7/8% senior notes due May 15, 2023 were 86¼ bid, 87 offered at midmorning.

Earlier Tuesday the Quebec-based specialty pharmaceutical company reported a better-than-expected quarterly profit on strength in its Bausch and Lomb eye-care business and maintained its full-year adjusted earnings forecast.

Elsewhere, the bonds of California Resources Corp. were 3 points to 3½ points better, and its stock price was up 15% despite early Tuesday softness in crude oil prices, the trader said.

Earlier in the week the company won approval from its lender group to amend its 2014 credit facility, extending the maturity to 2021. The proposed amendment would also provide covenant relief.

In the car rental sector, bonds of Avis Budget were down a point and its share price was 12% lower after the company reduced the high end of its full-year revenue guidance range, and reported that during the third quarter its unit fleet costs in the Americas significantly outpaced the growth in its revenue.

Bonds of Hertz Corp. were down in sympathy, the trader said.

Michael Baker brings deal

In the primary market Michael Baker International, LLC is marketing $227.5 million of 5.25-year senior secured notes via lead bookrunner Jefferies LLC.

The debt refinancing deal is set to price late in the Nov. 6 week.

As the market awaited official talk, Kratos Defense & Security Solutions, Inc. circulated initial price guidance of 6½% to 6¾% on its $300 million offering of eight-year senior secured notes (B), a trader said.

The deal, via lead left bookrunner Goldman Sachs & Co., is expected to price on Wednesday.

Navios Maritime Holdings Inc.'s $300 million of five-year senior secured notes are in the market with initial guidance in the 10% area, the trader said, adding that the deal is expected to price on Thursday.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, the trader said.

High-yield ETFs sustained $319 million of outflows on the day.

However actively managed funds saw $10 million of inflows on Monday.

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